"If You Can't Shop With The Big Dogs, Stay Out Of The Mall"

Man's best friend has become a priceless friend for Santa Barbara, Calif.-based Big Dogs, which has parlayed a canine concept into a $90 million company in five years. Primarily a leisure-apparel retailer, the catalog and retail company has evolved to use its brand, logo and dog witticisms on such diverse merchandise as coffee mugs, dog bowls and screen savers.

The legend of Big Dogs dates to 1983, when a group of river-rafting buddies designed some oversized shorts for a whitewater expedition. "Boy, these puppies are big," one of them exclaimed, thus inspiring the name "Big Dogs" and the logo that followed.

By 1992, when it was acquired by current chairman Fred Kayne and CEO Andrew Feshbach, Big Dogs had about $3 million in sales and three outlet stores. The new owners continued the outlet strategy - at first by necessity and then by design.

"We had a coming-out party in 1992 when the new owners took over," recalls Matt Lux, the company's vice president of real estate. "The only people who showed up were the outlet center developers. Our initial retail expansion plan was driven by the compelling economics found in the outlet center business."

After its $56 million public offering last year, Big Dogs is now in the midst of another growth step. The company's expansion program is taking the pooch beyond outlet centers and into regional malls.

Big Dogs' first mall store opened in late 1996 in Mall of America. The company currently has 166 stores, 15 of which are non-outlets. It expects to open 35 new stores this year - 29 in the United States, four in Canada and two in the U.K.

While not abandoning the outlet strategy altogether, the company is barking up other trees. As Lux says, "To know what your brand potential is, you've got to go outside your box, outside the paradigm of who you are."

Besides regional malls, the company is interested in locations in such urban areas as Manhattan and downtown Chicago. International expansion is also on the drawing board, as are nontraditional venues like airports.

"When people are on vacation, outdoors, maybe out ice skating or visiting an unusual boutique, they're in a situation where our products are perfect," Lux explains. "We look for that shopper in the Big Dogs frame of mind."

Not an everyday type of shopping experience, a visit to Big Dogs may at first involve impulse-buying, Lux says, adding that customers become profoundly loyal. "We get emotional letters about our product: 'I want to work at Big Dogs.' 'I want Big Dogs wallpaper.' It's very attitudinal. They identify with it; they personalize it. Our hook is emotional," he says.

The cause for all this passion is not necessarily the merchandise itself. Lux explains that Big Dogs apparel, although of high quality, is not trendy. "Obviously, we freshen things up a bit here and there," he says, "but we sell basic products and transform them with fun graphics and slogans."

Lux attributes the brand loyalty to a mixture of graphics and parody, both of which are trendy. "We keep our graphics current, and we're always looking at topical issues," he says.

The company capitalizes on fads from pop culture, parodying last summer's hit movie Men in Black with "Dogs in Black" merchandise. Its current best-selling T-shirt is "Seinfetch."

"One of our key merchandising strategies is to test our graphics on T-shirts," he says. "If it's successful, we roll out the design to other products."

Big Dogs has blended two seemingly discordant concepts: the original theme of an outdoors, active lifestyle; and puns and graphics related to dogs. Perhaps as a result, its core customer base consists of adults over 25 and children under 10 - but not teens.

Says Lux, "Our clothes are very fun, very lighthearted. That may not always attract the teenage customer. They want something a little more edgy. We're not edgy."

But "edgy" is exactly what the company seeks in its store design as it shifts to regional malls. Says Lux, "If you want shoppers to buy your full-priced items, you've got to give them a full-price shopping experience."

Riding the trend toward casual dining in the restaurant industry, Austin, Texas-based Schlotzsky's is carving its niche in the fast-casual segment with an aggressive turnkey program, begun two years ago to help franchisees open restaurants with fewer hassles. Meanwhile, it has upgraded its look with a new prototype.

The face of the chain has changed considerably since the 1971 opening of its first unit, a 600 sq. ft. deli in Austin that served one sandwich. In 1977, the company started franchising; in 1981, it was bought by the current management, which includes president and CEO John C. Wooley; and in 1995, it had its IPO.

Today, Schlotzsky's boasts nearly 700 restaurants in 39 states and 20 foreign countries. Expansion plans this year call for 130 to 150 new restaurants. The eventual goal is 4,000 stores in the entire system.

Schlotzsky's also has evolved in its development strategy, from in-line strip centers to end caps to rehabs and now to its own freestanding buildings.

"We like to be in the center of a developed retail area, where you have high-density residential and daytime population as well as shoppers traveling in and around the site," says Terri Seiler, vice president of real estate services.

Under the turnkey program, Schlotzsky's identifies the site, purchases the real estate, constructs the restaurant and sells it to a real estate investment trust (REIT), which then leases it back to the franchisee. Currently, the majority of Schlotzsky's properties are purchased by Dallas-based U.S. Restaurants and Scottsdale, Ariz.-based Franchise Finance Corporation of America.

A pure franchise company, Schlotzsky's requires three weeks of on-the-job training for its franchisees. The training center, located in Austin, is also the chain's largest-grossing store. Most franchisees are owner-operators.

The centerpiece of Schlotzsky's growth plans is the new, 3,200 sq. ft. prototype freestanding building. "Store design is one of the most critical components to the turnkey program because of the building's ambience," Seiler says. The majority of this year's openings are slated to have the new restaurant design.

Heading up the prototype design project was Schlotzsky's longtime in-house architect, Walt Fleming. "We made a conscious effort to be more like a casual diner than a fast-food restaurant," he recalls.

The new look combines various materials on the exterior. Brick was used at the entry and around three-fourths of the building. Ample use of glass allows people to see inside, while awnings provide additional ornament.

Further, says Fleming, "Window graphics and a lot of painted logos create an atmosphere that not only advertises our sandwiches, salads, soups and pizzas, but also borders on art rather than a standard concern for graphics."

Other key design components are a patio, which lends a sense of importance and scale, and landscaping.

Inside, wood furnishings and brick abound. "We used brick in a way that shows age," Fleming explains. "It's an older brick that has some tumbles, cracks and dings on the corners, establishing an older, time-worn feel."

Vinyl flooring that looks like wood achieves the goal of a classy appearance minus the maintenance headaches.Besides making operation easier for f ranchisees and giving customers an appealing setting, the design aimed to establish a uniform national image.

The role of image has altered considerably over the years. As Fleming recalls, "The message at Schlotzsky's back in the early '70s was, 'Just one sandwich. It's that good.'" With so much focus on the product, he says, restaurant location and design were largely neglected, an approach typical of the entire restaurant industry.